The Keynesian Revolution and
the Neo-liberal Counter-revolution

By Dr. Eric Toussaint

Global Research, July 15, 2009

As a result of the depression of the 1920s and 1930s, a new wave of critics tackled the neo-classical creed on a largely pragmatic basis. This new wave was international and involved political leaders and economists from differing belonging to various currents backgrounds: enlightened bourgeois thinkers, socialists and Marxists. In a context of mass unemployment and depression, proposals came forward for major public works, for anti-cyclical injections of public money, and even for bank expropriations. Such proposals came from a wide variety of sources: Germany's Doctor Schacht; the Belgian socialist Deman; the founders of the Stockholm School, backed by the Swedish social democrats; Fabian socialists and J.M. Keynes in Britain; J. Tinbergen in the Netherlands; Frisch in Norway; the Groupe X-crise in France; Mexican president Lazaro Cardenas (1935-1940); adepts of Peronism in the Argentina of the 1930s; US president Roosevelt (elected in November 1932) and his New Deal.The entire range of proposals and pragmatic policies was partially summed up in Keynes's 1936 work General Theory of Employment, Interest and Money.The Keynesian revolutionThe preparatory work carried out by Keynes (1883-1946), laying the groundwork for the General Theory, was fuelled by the need to find a solution to the spreading crisis of the capitalist system. Moreover, this solution had to be compatible with the continued survival of the system. The work was partially the result of a wide-ranging collective process wherein groups and individuals ended up in different Keynesian camps, often very much at odds with one another. Some leaned more towards Marxist positions, such as the Briton Joan Robinson and the Pole M. Kalecki, who had actually formulated the key components of the General Theory before Keynes. Others grew progressively closer to the very tenets of liberalism and neo-classical economics that Keynes decried.
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